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Triple whammy for some advisers

Financial advisers who operate through company structures could be hit with a double or even triple whammy when it comes to paying application fees under the new regulatory regime.

Thursday, May 13th 2010, 3:59AM 3 Comments

by Sonia Speedy

The Securities Commission and the Companies Office have confirmed that as well as the financial adviser themselves, any company the adviser operates that is deemed to be a financial services provider must be registered too.

The company must also be part of a consumer dispute resolution scheme. However, the adviser can be covered by the company's scheme under Section 19 of the Financial Advisers Act. If the adviser needs to be authorised, the fee for this would come on top.

An adviser operating as a sole trader would see total fees of about $1,415 for authorisation and registration applications combined and would then need to pay to join a dispute resolution scheme on top of this.

The first dispute resolution scheme to be approved - Financial Services Complaints Limited -has a base joining fee of $500, and $500 annually.

A similar adviser running just one applicable company would be faced with this same cost - less the dispute resolution scheme membership, but would also need to register the company ($350 plus criminal history checks and dispute resolution scheme administration charges). They would also need to sign the company up to a dispute resolution scheme.

Advisers that operate multiple companies could have to pay these registration fees and the cost of joining a dispute resolution scheme, several times over.

Securities Commission head of supervision Angus Dale-Jones says it is difficult to comment on the fees payable where multiple companies are being operated.

"It depends on the operating structure of each entity and the individual's relationship to each," he says.

However, Dale-Jones says that under the current law it could be the case that advisers have to pay fees for each individual company.

The Companies Office agrees with Dale-Jones.

It adds that if companies are financial service providers in their own right as set out in section five of the Financial Service Providers Act, then they must all be registered, with separate application fees paid, and dispute resolution scheme membership in place.

Chatswood Consulting's Russell Hutchinson says many advisers are only expecting to have to register themselves and do not realise they will need to register their companies as well.

« Advisers forced to tell on each otherIndependent advisers in for a rough time: Weatherston »

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Comments from our readers

On 13 May 2010 at 7:26 am Murray Weatherston said:
I wonder if you would ask the Companies Office and/or Securities Commission how they can register the company of a sole practitioner financial services provider where the adviser is involved in category 1 products or financial planning services.
As I read s 13 (c) of the FSPA, an entity that operates in a licensed area (incl cat 1 products and financial planning services) can be registered if and only if the entity holds all the appropriate licences.
As we all know, only individuals can be authorised - ergo the company cannot be authorised. So if it can't get the required licence, how can the Companies Office register the company as a FSP?
On 13 May 2010 at 7:34 pm B said:
Doesn't the Financial Service Providers Act apply only to companies that offer to the public? If the service is business to business then are they not completely outside the regulation??
On 18 May 2010 at 10:41 am Peter Marriott said:
There seems to be a fundamental conflict between the FSP Act which is focused on businesses, and the FA Act which is focused on indivduals. The recent "Business Update" seminars by the MED confirmed that the FSP Registrar wanted the businesses and that officers would not even be named on the FSP Register, but as you point out, both need to be registered. FSCL has adopted a practical solution and all participants will be recorded as being members of our approved scheme as both companies and individuals, with only one fee payable.
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